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Trade Management
Module 1.
Main Topics: Corporate Environment Competitive Advantage Competitive Strategies Markets Industrial V Consumer E-Commerce
Trade Management
Corporate Environment
Trade Management
Trade Management
Business Organization
Trade Management
Competitive Analysis
Trade Management
Industry Environment (Porter’s Five Forces) The Bargaining Power of Your Customers
# of competitors? # of customers?
The Threat of New Entrants into Your Industry The Bargaining Power of Suppliers
Unique product? Threat of Substitute Products or Services Rivalry Amongst Existing Firms
Advertising, Differentiation, Price competition
Trade Management
Competitive Advantage
Definition: A competitive advantage is an advantage
over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices
Trade Management
4 Generic BusinessStrategies (Michael Porter)
Best Cost Provider Strategy
Trade Management
Competitive Strategies Strategy- Differentiation
Select one or more criteria used by buyers Position business uniquely to meet those criteria Option:
Charge a premium price that more than covers the higher production costs and extra value-added features
Examples: BMW, Mercedes, Bang & Olufsen
Trade Management
Competitive Strategies Strategy- Cost Leadership
Become the lowest-cost producer in the industry Usually associated with large-scale businesses offering “standard”
products with relatively little differentiation that are perfectly acceptable to the majority of customers
Aim to maximize sales to gain market share Used when not a lot of products are different and business has
significant buying power Examples: Nissan, Tesco, Dell Computers, Walmart
Trade Management
Competitive Strategies Strategy- Differentiation Focus
Business aims to differentiate within just one or small number of target market segments
Special needs of segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers
Needs to be a Valid basis for differentiation Examples: Any successful niche retailers – Apple, UnderArmour
Trade Management
Competitive Strategies Strategy- Cost Focus
Business seeks a lower-cost advantage in just one or a small number of market segments
The product will be basic-perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. (“me-too’s”)
Examples: Private-label goods manufacturer of over the counter health products for Walmart, Rite-aid or Motel 6 (No frills hotel)
Trade Management
Markets: Industrial V Consumer
Market Structure
Industrial Market
• Geographically Concentrated• Fewer buyers• Big buyers• Small # of large buyers
Consumer Market
• Dispersed• Mass markets• Free market• Large # of buyers
Trade Management
Markets: Industrial V Consumer
Buyer Behavior
Industrial Market
• Evaluated for functional, rational/task motive to buying • Purchasers are experts and focus is on performance/service• High interaction with supplier• Formal processes (tenders etc)
Consumer Market
• Social/psychological factors are important• Family & social factors• Limited personal relationship with supplier• Less of formal process
Trade Management
Markets: Industrial V Consumer
Products
Industrial Market
• Technical complexity high• Customized • Service, delivery and availability is important
Consumer Market
• Standardized• Service, delivery and availability is somewhat important
Trade Management
Markets: Industrial V Consumer
Decision Making
Industrial Market
• Distinct observable stages• Multiple influencers and decision makers
Consumer Market
• Unobservable• Mental stages, not very clear• Emotional
Trade Management
Markets: Industrial V Consumer
Pricing
Industrial Market
• Competitive bidding• Multistage negotiation• Sharing of information:
• Cost data• Specifications (technical)• Funding?• Cost + plus (profit)
Consumer Market
• Normally MRP & MOP• Concept of list price• Discounts to overload inventory
Trade Management
• E-commerce: Use of the Internet and Web to transact business; digitally enabled transactions
• Began in 1995 and grew exponentially; still growing at an annual rate of 25 percent
• Companies that survived the dot-com bubble burst and now thrive
• E-commerce revolution is still in its early stages
E-Commerce Today
Trade Management
E-Commerce Growth
Trade Management
• Ubiquity
• Internet/Web technology available everywhere: work, home, etc., anytime.
• Global reach
• The technology reaches across national boundaries, around Earth
• Commerce enabled across cultural and national boundaries seamlessly and without modification
Unique Features E-Commerce
Trade Management
• Universal standards
• One set of technology standards: Internet standards
• Effect:
• Disparate computer systems easily communicate with each other
• Lower market entry costs
• Interactivity
• The technology works through interaction with the user
• Effect:
• Consumers engaged in dialog that dynamically adjusts experience to the individual
• Consumer becomes co-participant in process of delivering goods to market
Unique Features E-Commerce
Trade Management
• Information density
• Large increases in information density—the total amount and quality of information available to all market participants
• Effect:
• Greater price transparency
• Greater cost transparency
• Enables merchants to engage in price discrimination
Unique Features E-Commerce
Trade Management
• Richness
• Supports video, audio, and text messages
• Effect:
• Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people
• Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience
Unique Features E-Commerce
Trade Management
Unique Features E-Commerce • Personalization/Customization
• Technology permits modification of messages, goods
• Effect
• Personalized messages can be sent to individuals as well as groups
• Products and services can be customized to individual preferences
• Social technology
• The technology promotes user content generation and social networking
• Effect
• New Internet social and business models enable user content creation and distribution, and support social networks
Trade Management
Unique Features E-Commerce
• Digital markets reduce
• Information asymmetry
• Search costs
• Transaction costs
• Menu costs
• Digital markets enable
• Price discrimination
• Dynamic pricing
• Disintermediation
Trade Management
Disintermediation to Consumer
Trade Management
Private Industrial Network
Health care products: set up by Johnson & Johnson, G.E. Medical Systems, Baxter International, Abbott Laboratories, and Medtronic Inc.; called the Global Health Care Exchange (ghx.com)
Defense and aerospace products: created by Boeing, Raytheon, Lockheed-Martin, and Britain’s BAE Systems; called the Aerospace and Defense Industry Trading Exchange (exostar.com)
Food, beverage, consumer products: set up by 49 leading food and beverage firms; called Transora (transora.com)
Retail goods: setup by Sears and France’s Carrefour; called Global Net Xchange, for retailers (gnx)
Trade Management Internet Exchanges
Trade Management
Net Marketplace
Trade Management Types of E-Commerce Transactions
Business Consumer
Business B2BGM/Ford/Daimler’s Covisint exchange
B2CAmazon, Dell, Net
Grocer.com
Consumer C2BPriceline, Travelocity
C2CEbay
Access Control and SecurityAccess ControlAuthentication
Security Measures
Content ManagementDynamic ContentGeneration
Data Repository
Catalog ManagementPricing Calculation
Product Configuration
Catalog Generation
Profiling and PersonalizingProfile Management
Personalization
Behavior Tracking
Search Management
Content-Based Search
Parametric-Based Search
Role- and Rule-Based Search
PaymentShopping Cart
Payment Method Support
Payment Verification
Workflow ManagementBuying Process Automation
Document Management
Rule- and Role-Based Content Routing Event
NotificationEvent-Driven Transaction Messaging
Message to e-mail Message Boards Newsgroups
Collaboration and Trading
Mediation Negotiation
Bidding/Auctioning Collaborative Buying
Online Community
Trade Management E-Commerce Processes
Improved, lower cost information
Lower entry costs
Available 24/7, virtually anywhere in the world
Availability expands markets for both buyers and sellers
Decreases the cost of paper-based information
Reduces the cost of communication
Provides richer communication than traditional means
Fast delivery of digitized products
Increased flexibility of location
Trade Management Benefits of E-Commerce
Lack of system security, reliability and standards
Lack of privacy
Insufficient bandwidth
Integrating e-commerce software with existing software is still a challenge
Lack of trust in unknowns on the other end of the transaction, integrity of the transaction itself, and electronic money that is only bits and bytes
Trade Management Limitations of E-Commerce